Rising food prices could put brakes on biofuel

by Philip Brasher on Jun 06, 2008, under Nation/World, Opinion

U.S. ethanol producers and farm groups say biofuel production is being unfairly blamed for global increases in food costs. These groups see the Grocery Manufacturers Association, a Washington-based trade group that represents companies such as General Mills and Kraft, behind the international concerns that are being raised about ethanol and food prices.

Americans griping about the higher cost of food might want to take a look at what’s happening in places such as Kenya or Sri Lanka.

Food prices in those countries rose 25 percent during the past year, more than four times the inflation U.S. consumers saw, according to a new report by the United Nation’s Food and Agriculture Organization. In Botswana, food prices are up 18 percent.

It’s those kinds of price increases that alarm aid organizations and economists. They say that food is becoming unaffordable for the world’s poorest people, who already spend 50 percent to 70 percent of their income on simple meals.

These price increases are also feeding the growing concerns worldwide about U.S. and European biofuel policies.

The organization’s report, issued in advance of a conference on food security this week in Rome, warns that 22 nations are especially threatened by rising food prices.

One is Kenya, where nearly one-third of the population is undernourished and the price of corn has nearly doubled to more than $7 a bushel in the past year. Corn meal is used to make a mash or porridge known as ugali, a staple of the Kenyan diet.

“When that (corn) is affected, everybody in Kenya is affected,” said Njoroge Maina, an agricultural adviser for CARE, a U.S.-based aid group.

In the United States, the rising price of corn induced farmers to grow more of the crop, but in Kenya that hasn’t happened. The government last week estimated that production in the country’s key grain-growing region would fall more than 20 percent this year.

Part of the problem is the violence that disrupted the nation after its recent elections, but the soaring price of fertilizer and fuel also is a factor, Maina said.

Farmers planted less acreage and they used less fertilizer on what they did plant, he said. The nation’s grain reserves are due to run out in August, forcing the nation to rely on imports, he said.

“Even while the price of the commodity has gone high, the common man may not benefit because of reduced production,” said Maina, referring to farmers.

U.S. ethanol producers and farm groups say biofuel production is being unfairly blamed for global increases in food costs. These groups see the Grocery Manufacturers Association, a Washington-based trade group that represents companies such as General Mills and Kraft, behind the international concerns that are being raised about ethanol and food prices.

“Some of the international organizations that have looked at this are just looking at the talking points from (the grocery association),” said Bob Dinneen, president of the Renewable Fuels Association.

Economists with the International Food Policy Research Institute, a Washington-based analyst funded by governments and foundations, agree that biofuel production is only one of several factors behind the recent food price increases.

Demand for food has grown because of growing populations and income in countries such as China and India. Droughts reduced wheat production last year. Export bans have driven up the price of foods, such as rice.

Nevertheless, food policy institute economists say one step governments can take to rein in food prices is to halt the growth in biofuel production.

Rolling back U.S. incentives for ethanol would be enough to “bring some children in developing countries out of hunger,” the institute’s Mark Rosegrant told a Senate committee recently.

Freezing biofuel production at 2007 levels would lower the price of corn by 6 percent in 2010 and 14 percent by 2015, according to the group.

No one in Washington expects such a freeze to happen anytime soon, certainly not ahead of an election, given the political clout of the farm and ethanol lobby.

But if the kind of inflation that nations such as Kenya are seeing continues, biofuels may be a tougher sell to the rest of the world.

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